In the lead-up to 30 June 2018 we want you to know why using a “bucket company” can be a great strategy for saving tax on trust profits distributed.
PROFITS FROM A TRUST
Do you have a Trust that generates profits? If yes, then read on!
A bucket company allows you to “cap” or effectively limit the tax on profits distributed by a trust to the company tax rates of 30% or 27.5% – which is much less than the individual top marginal rate of 47%!
Here’s how this works:
Assume a trust earns $250,000 in profits from business or investment.
Option 1: Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $72,764 (29.1%)
Option 2: Distribute $87,000 each to Individuals 1 & 2 and distribute balance of $76,000 to a “bucket” company at a 30% tax rate. Total tax payable = $65,924 (26.4%)
Which would make the value of the strategy $6,840 in tax saved!
The cash in a “bucket company” can then be used to invest in items such as shares or property, or to lend to other entities at a set interest rate.
But… You need to discuss this with your advisor BEFORE you do it, as there are different tax laws that affect the use of this strategy, and whether your “bucket company” can use a tax rate of 30% or 27.5%.
We understand these tax laws and can make this easy for you.
Contact us today! to book your personal Tax Planning Session. This session will be tailored to your individual needs and requirements. The sooner we get started, the sooner we can help you save tax. You need to act now, to allow sufficient time to implement your tax saving strategies before the 30th of June.
Imagine what you could do with your tax saved!
- Reduce your home loan
- Top up your super
- Have a holiday
- Deposit for an investment property
- Pay for your children’s education
- Upgrade your car
Don’t miss out!
NOW is the time to discuss with us the actions you can take before 30th June to reduce your tax and grow your wealth